Maveron co-founder Dan Levitan’s VC playbook for identifying brands that can scale
When Dan Levitan, along with former Starbucks CEO Howard Schultz, launched consumer-focused venture capital fund Maveron in 1998, the pair decided on eBay as their first investment.
Maveron’s thesis was that technology was going to play a bigger role in consumers’ lives and how they buy products. At the time, that meant getting in early on marketplace startups, where customers could for the first time buy from a wide selection of products online. Today, it means that brands are able to go from “obscurity to ubiquity” in an unprecedented amount of time, thanks in large parts to investments in digital media like Facebook and Google.
Maveron’s current investments include Allbirds, Everlane, Dolls Kill, Dia & Co, Imperfect Produce and Keeps. Levitan spoke with Modern Retail about what his firm wants to see from entrepreneurs looking to secure an investment, and how Maveron helps its portfolio companies navigate the “Facebook-Google Tax.”
Finding entrepreneurs who can build multi-billion brands
Maveron invests in people, not businesses. What that means in practice is that the most important criteria for Maveron when considering a new investment is whether or not they believe that founder or co-founders has the skillset to build a multi-billion brand that “hopefully turns into a movement over time.”
“We’re in the venture capital business — we need large outcomes,” Levitan said. “Can this be a big national or international business and be broadly applicable to hundreds of thousands, if not millions of consumers?”
Maveron’s most successful investments right now are those have built a value proposition around a social mission, he said — for Everlane, that’s building a more transparent and ethical supply chain, for Allbirds that’s selling products from sustainable materials, and for Imperfect Produce, that’s reducing food waste. Levitan said that having a clearly stated mission is helpful for early-stage companies in both attracting new customers organically and recruiting employees. It’s one of the things that convinces Maveron that the founders can start a business that can “hopefully turns into a movement overtime.”
Additionally, Maveron likes to look for founders with complementary skillsets. With Allbirds, Levitan liked that one co-founder, Joey Zwillinger had a background in environmental and sustainable materials, while the other, Tim Brown, had a design background.
Investing in multi-channel businesses
Levitan said that Maveron will invest only in multi-channel businesses, but that there’s no exact time by which Maveron thinks that a brand needs to expand offline or open a store, as it varies by company and the product they are selling.
“If you are a Warby Parker customer, your first pair of glasses might very well be purchased at a store, where you want it to get fit given the peculiarity of your own head, but then your second order might be placed online,” Levitan said. He added that most of Maveron’s portfolio companies have seen a lift in online sales in the cities where they’ve opened stores.
When it comes to marketing channels, early on Maveron likes to see businesses that have “high referral rates and high organic acquisition.” Additionally, Maveron doesn’t like to see companies that are too dependent on one marketing channel. Levitan said that when a company is spending about a third of its marketing budget or more on one marketing channel — that’s a sign that it is becoming too dependent on that channel.
Helping portfolio companies identify emerging platforms for customer acquisition
Levitan said that Maveron only focuses on consumer brands so that “we’re able to develop a lot of pattern recognition on consumer behavior,” and can better help them solve problems they all face. Today, Levitan said that the biggest challenges Maveron’s portfolio companies face is the “Facebook-Google Tax.”
“These platforms have gotten big, and they have taken a lot of profitability out of consumer brands that are dependent on paid, digital acquisition,” Levitan said. “Many of them are acquiring customers at completely mediocre costs of acquisition and mediocre costs to a lifetime value relationship, so today one of the things we can do is help companies diversify away from the chokepoints of these digital platforms.”
Last month, Maveron hosted a “customer acquisition summit” for its portfolio companies to share notes on what new marketing channels they’ve been testing, and what has and hasn’t been working for them. In January, Pinterest’s former head of culture Cat Lee, joined Maveron as a partner. So Lee has helped some of Maveron’s portfolio companies build a stronger relationship with Pinterest in particular, and encourage them to test out the platform.
“You always have to be testing and learning — these channels work until they don’t and then when they don’t work, you’re in trouble,” Levitan said.